Incoming BC Hydro CEO Jessica McDonald may not have energy sector expertise, but her experience as deputy minister to former premier Gordon Campbell and head of the public service mean she's well-acquainted with the challenges facing the Crown corporation.

VICTORIA — When new CEO Jessica McDonald moves into the executive suite at BC Hydro next month, she’ll be stepping into a post with a pay grade 10 per cent lower than that of her predecessor.

The B.C. Liberals imposed the reduction for new executive hires at the government-owned utility as part of a populist drive to reduce top-end compensation across the broad public sector.

Outgoing Hydro CEO Charles Reid, who retires this month, was paid $531,000 out of a possible $550,000 for the position. McDonald starts in mid-July at $495,000 in total compensation.

The reduced rate still leaves her near the top of the heap in terms of compensation across the provincial public sector.

But the half-million-dollar-a-year salary provides a point of comparison for the complaint that McDonald lacks expertise in running a giant energy company like BC Hydro.

“Jessica McDonald has no experience in the energy sector,” as Opposition leader John Horgan observed when the McDonald appointment was announced last week.

True enough. But even before the Liberals began reining in public sector compensation, Hydro was not in a position to offer the kind of salary necessary to attract a qualified CEO from a private sector energy company.

Take the case of Dawn Farrell. She has three decades experience in the energy sector including a four-year stint, starting in 2003, as a senior executive at BC Hydro. She served as Hydro’s executive vice-president in charge of generation, then later she was in charge of engineering and aboriginal relations.

In 2007 she returned to her home base in Calgary to take up an executive position at TransAlta Corporation, that province’s energy giant — natural gas, coal, wind, hydro, geothermal — where she’d worked extensively earlier in her career.

Had she remained at BC Hydro, she’d probably have been on the fast track to head up the utility. Instead, two years ago, she was elevated to the top spot at TransAlta, where she’s now ranked as one of the highest-paid female CEOs in the country.

Total compensation for Farrell last year, including base salary, bonus, share-based rewards and pension: $5.7 million, more than 10 times what BC Hydro was able to offer McDonald.

Or take the example of a female utility company CEO from south of the border: Bellevue-based Puget Sound Energy, which has 3,000 employees to BC Hydro’s 6,000, and $3 billion in annual revenues versus $5 billion. All-in compensation for CEO Kimberly Harris was $3.7 million last year.

Granted, the public sector can’t hope to compete with the pay scales in the private sector. But neither is BC Hydro in the same league as the two government-owned energy utilities in Ontario. Ontario Power Generation pays its CEO $1.7 million a year and it has a dozen or so other executives at or above the half-million-dollar a year mark. Ontario Hydro One pays its CEO about three quarters of a million a year.

In that league, Manitoba Hydro pegs the salary for its CEO at a bargain basement $375,000, according to the last public report. But in recruiting a candidate from here in B.C., the Hydro board gained some advantages as well.

McDonald’s qualifications are threefold. First, during the second term of B.C. Liberal government, 2005-2009, she served as deputy minister to then-premier Gordon Campbell and head of the entire 30,000-plus provincial public service.

Second, during those years, she played a leadership role in formulating the New Relationship, a forward-thinking effort to share land, resources, revenues and decision-making with First Nations on a government-to-government basis.

First Nations are critical to Hydro’s ability to develop energy resources in the province, not least the proposal to build a hydroelectric dam at Site C on the Peace River. The recent report of the joint review panel said that the dam would trample the hunting, fishing and trapping rights of local First Nations, leaving Hydro no option but to secure their consent if the $8-billion project is to proceed.

Third, McDonald has some first-hand familiarity with the inherent tensions in the relationship between the government and its largest Crown corporation, dominated as it is by political, economic and fiscal considerations.

Not long after she joined the premier’s office, the Liberals forced Hydro to pull back on the scheduled release of its long-term energy plan with less than 48 hours notice. Reason: an internal-to-government concern that the utility was moving too quickly to promote development of Site C.

Three summers ago the interference scenario played out again, as new Premier Christy Clark dispatched a trio of public servants to pull back on Hydro’s plans for a 50-per-cent rate increase and second-guess staffing levels and other plans at the utility.

That set the stage for the departure, after a mere 18 months on the job, of Dave Cobb, Reid’s predecessor as CEO.

Looking at the current state of affairs at Hydro, one sees the consequences of government meddling at every turn — from the excessive resort to deferral accounts, to artificially low rates, to the dubious requirement for energy self-sufficiency, to deliberate avoidance of scrutiny by the independent utilities commission.

No small list of challenges. But to get on top of them will take political and bureaucratic acumen more than intimate knowledge of the energy industry. On that score, McDonald is at least familiar with the terrain.

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